The Big Picture: ₹7,100 Crore in Penalties
According to data presented by the government in Parliament, banks across India collected nearly ₹7,100 crore in penalties for non-maintenance of Minimum Average Balance (MAB) during the financial year 2025-26. This figure marks an increase from the approximately
₹6,800 crore collected in the previous year, highlighting a growing source of non-interest income for the banking sector. The data reveals a significant disparity between private and public sector banks. Private banks were the primary collectors, accounting for nearly 70% of the total, amounting to ₹4,948 crore. In contrast, public sector banks (PSBs) collected ₹2,137 crore during the same period.
Who Collects the Most?
Within the private sector, a few key players dominate these collections. HDFC Bank led the pack, levying nearly ₹1,800 crore in charges, followed by Axis Bank with ₹1,081 crore. Together, these two institutions accounted for almost 58% of all minimum balance penalties collected by private banks. Among public sector banks, State Bank of India (SBI) had the highest collection at ₹477 crore. However, the government clarified that SBI's charges primarily pertain to current accounts, as the bank waived minimum balance penalties on its savings accounts back in March 2020. Following SBI were Bank of Baroda and Indian Bank in the PSB category.
How These Charges Work
Minimum balance charges are penalties levied when an account holder's average balance for a month or quarter drops below a pre-defined threshold. This threshold, or Minimum Average Balance (MAB), varies significantly based on the bank, the type of account, and the branch's location—categorised as metro, urban, semi-urban, or rural. For instance, a metro branch of a private bank might require an MAB of ₹10,000, while a rural branch of a public sector bank might require just ₹1,000, if at all. The Reserve Bank of India (RBI) allows banks to set their own policies for these charges, provided they are reasonable and transparent. Banks are also required to notify customers via SMS or email before applying penalties, giving them time to restore the balance.
The Diverging Paths of Public and Private Banks
There is a clear strategic split in the Indian banking landscape. In recent years, most public sector banks have moved to eliminate these penalties on savings accounts to promote financial inclusion. According to government statements, 10 out of the 12 PSBs have discontinued such charges for savings accounts. This has led to a decrease in their total collections from MAB penalties. Conversely, many private sector banks continue to view these charges as a stable component of their fee-based income, which is reflected in their significantly higher collection figures.
How to Avoid Minimum Balance Charges
For customers, avoiding these penalties is straightforward with the right information. The most effective method is to opt for an account type that is exempt from minimum balance requirements. All banks are mandated to offer Basic Savings Bank Deposit Accounts (BSBDAs), which are zero-balance accounts by design. This category includes accounts opened under the Pradhan Mantri Jan Dhan Yojana (PMJDY). As of early 2026, around 730 million such accounts were exempt from these penalties, offering essential banking services like deposits, withdrawals, and ATM cards without the risk of charges. Many salaried accounts are also treated as zero-balance accounts. If you find yourself frequently paying penalties, converting your regular savings account to a BSBD account could be a prudent financial decision.
